McCoy Brothers manufactures and sells two products,A and Z in the ratio of 5:2.Product A sells for $75;Z sells for $95.Variable costs for product A are $35;for Z $40.Fixed costs are $418,500.Compute the break-even point in composite units.
A)2,092.
B)3,805.
C)1,350.
D)1,395.
E)1,550.

Question

Quizplus · Accepted Answer

Let's assume that the number of composite units sold is x.
So, the number of units of A sold = 5x/7 and the number of units of Z sold = 2x/7
Revenue earned from A = 5x/7 * $75 = $54.17x
Revenue earned from Z = 2x/7 * $95 = $27.14x
Therefore, total revenue earned = $54.17x + $27.14x = $81.31x
Total variable cost for A = 5x/7 * $35 = $25x
Total variable cost for Z = 2x/7 * $40 = $11.43x
Therefore, total variable cost = $25x + $11.43x = $36.43x
Total cost (variable cost + fixed cost) = $36.43x + $418,500
At the break-even point, total revenue = total cost
So, $81.31x = $36.43x + $418,500
Solving for x, we get x = 1,350
Therefore, the break-even point in composite units is 1,350.

McCoy Brothers Manufactures and Sells Two Products,A and Z in the Ratio